Private Equity Waterfall and Carried Interest Provisions: Economic and Tax Implications for Investors and Sponsors

Structuring Distribution Waterfalls, Carried Interest Clawbacks and Allocations; Carried Interest Sharing at the Fund Sponsor Level; Related Planning and Drafting to Address Tax Consequence

An encore presentation featuring live Q&A

Recording of a 90-minute CLE/CPE webinar with Q&A

Conducted on Tuesday, June 14, 2016

Recorded event now available

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Program Materials

This CLE webinar will analyze various methods of structuring waterfall provisions in private equity funds and carried interest distributions to fund managers and among their personnel, as well as related clawback and allocation provisions. The program also will examine the tax implications of such provisions.


Waterfall provisions governing distributions are one of the most critical components of the relationship between a private equity fund sponsor and its investors. These provisions affect the amount and timing of the return of investor capital, the return on investor capital and the sponsor’s receipt of carried interest distributions. There are several variations that can significantly affect the economic results for investors and the sponsor.

In addition to variations in distribution waterfalls, other important considerations in drafting fund economic provisions include (i) the tax implications of the distribution waterfall and the income and loss allocations; (ii) tax distribution provisions to address phantom income; and (iii) clawbacks that allow investors to recoup carried interest distributions to the sponsor under certain circumstances.

All of these considerations have corresponding implications at the fund sponsor level. Sharing of carried interest among sponsor personnel is a key aspect of incentive compensation arrangements for fund managers. Variations in these sharing arrangements require careful drafting and planning.

Listen as our authoritative panel discusses structuring waterfall provisions, carried interest distributions, carried interest sharing options at the sponsor level, clawbacks and allocation provisions for private equity funds and their sponsors, as well as the tax implications of such provisions.



  1. Typical waterfall variations and their economic implications for investors and the sponsor
  2. Carried interest clawbacks
  3. Carried interest sharing arrangements at the general partner level
  4. Tax ramifications, allocation provisions and tax distributions


The panel will review these and other key issues:

  • What are the typical approaches for structuring a private equity fund distribution waterfall?
  • How do these variations affect the timing of carried interest distributions to the sponsor?
  • What are some of the approaches to sharing carried interest at the sponsor level?
  • How can counsel address phantom income concerns for the sponsor?

This is an encore presentation with live Q&A.


Kallos, Chris
Chris P. Kallos

Kirkland & Ellis

Mr. Kallos is a corporate partner who is recognized internationally as one of the top attorneys in the area of...  |  Read More

Meehan, Daniel
Daniel P. Meehan

Kirkland & Ellis

Mr. Meehan is a tax partner in the Chicago office of Kirkland & Ellis LLP. His practice focuses on the tax...  |  Read More

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